Exploring Put Options for Incyte Corporation Investments

Investors interested in acquiring shares of Incyte Corporation (Symbol: INCY) may want to consider an alternative strategy to the current market price of $58.07 per share. Selling put options is one method to contemplate, particularly the September put at the $50 strike, which had a bid of $2.15 at the time of this writing. Collecting this premium represents a 4.3% return on a $50 commitment, equating to a 10.6% annualized return.

Understanding the Dynamics of Selling Puts

Selling a put option does not grant investors the same upside potential as owning shares directly. An investor in this scenario will only acquire shares if the option is exercised. The counterparty to the contract will benefit by exercising the option only if it is more advantageous than selling at the current market price. If Incyte Corporation’s shares fall 13.9% and the option is exercised, the cost basis will be $47.85 per share before commissions (which is calculated by subtracting the $2.15 premium from the $50 strike price). Hence, the put seller’s only upside is the premium collected for the 10.6% annualized return.

Visualizing Market Movements

Below is a chart illustrating the trailing twelve-month trading history for Incyte Corporation, highlighting the $50 strike’s position relative to historical prices:

Evaluating Risk Against Reward

The chart and Incyte’s historical volatility provide essential context to evaluate whether selling the September put at the $50 strike yields sufficient reward for the assumed risks. An assessment of the last 250 trading days shows that Incyte Corporation has a trailing twelve-month volatility of 34%. For additional put options across various expirations, investors can visit the INCY Stock Options page.